DBS adding hedge funds in HK, Singapore

Singaporean bank DBS is expanding the number of hedge funds on its recommended fund list  in Hong Kong, taking the view that wealthy investors will be more receptive to such strategies to obtain alpha this year.

The Hong Kong team will be selecting from a universe of hedge funds already approved by the centralised due diligence team headed by Pierre DeGagne in Singapore, which is reviewing the entire hedge fund list with a view to adding more.

DBS aims to add two to three more hedge funds in Hong Kong, said Rocky Cheung, Hong Kong head of investment advisory for wealth management at DBS. It currently has only one on the recommended list, a global absolute-return product covering multiple assets and with multiple trading strategies.

“Given the increased uncertainty about global economic growth, we are looking for hedge funds with multiple strategies and with geographical diversification this year," Cheung told AsianInvestor. "We expect to be able to complete another two to three hedge fund reviews in the first quarter of this year."

DBS's move reflects a trend for private banks in Asia to put more alternatives products on their shelves in the past couple of years with a view to boosting client portfolio returns and diversification -- Bank of Singapore being another recent example.

DBS's decision to put more hedge funds on the recommended list was not driven by client demand, he added: “We think this is the right time. This is a business opportunity; you can’t wait for clients to come."

DBS has many hedge funds on the private bank (clients with HK$8 million ($1 million) and above in net worth) and Treasures private client (HK$1 million to HK$8 million) platforms, but they are not being actively recommended.

“We tightened our fund selection process last year, therefore the frontline staff can only actively advise those hedge funds that have gone through the newly set-up fund selection process,” explained Cheung. “For those hedge funds that haven’t gone through the new selection process, we still can trade for clients upon reverse enquiry.”

For the past year or so Cheung said the bank had taken a more involved approach to onboarding funds due to more stringent regulations in different markets. 

In the past, DBS’ frontline staff could market all hedge funds that had a distribution agreement with the bank. Some of the funds may have been sitting on the platform for years. Now the frontline staff can only actively recommend funds that have gone through the newly set-up selection process.

DBS has about 1,000 funds on its platform, of which 5% are alternatives products.